Insys Therapeutics, Inc., a specialty pharmaceutical company, develops and commercializes supportive care products. The company markets Subsys, a sublingual fentanyl spray for breakthrough cancer pain in opioid-tolerant cancer patients in the United States. Its lead product candidate is Syndros, an orally administered liquid formulation of dronabinol. The company is also developing Cannabidiol Oral Solution, a synthetic cannabidiol for childhood catastrophic epilepsy syndromes; and other product candidates, including other dronabinol line extensions and sublingual spray product candidates.
Take a look at the 1-year chart of Insys (NASDAQ: INSY) with the added notations:
INSY has been trending lower for most of the entire year. During the last 3 months the stock had held a clear level of support at $12.50 (red). With a market moving higher over the last year, INSY has not been able to follow along and broke below $12.50 yesterday. This breakdown is not only a new 52-week low, but it’s also a break of a key support level.
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The Tale of the Tape: INSY has broken a key support level of $12.50, which was also a 52-week low breakdown. This should signal lower prices ahead for the stock. A short trade could be entered on INSY on a rally back up to $12.50, with a stop set above that level. A break back above $12.50 would negate the forecast for a move lower and a long position could be considered instead.
Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT
Follow me on Twitter: @cmtstockcoach